When it comes to loans, there are several different types of loans that may or may not be available to you in a given circumstance. One type of loan is what is known as a personal loan. A personal loan is a simple and straightforward type of loan in which one person borrows from another person without the need for any form of commercial lending institution. These loans and their conditions are set based upon a mutual agreement between you and the lender but in most cases have a high rate of interest.
A simple example of a personal loan is while you and your friends are out doing something, you see something that you really want but do not have the cash to buy it. You turn to a friend and ask if they can “cover" you and you will “get them back" soon. As a result, your friend loans you the money needed to get the item and a couple days later or when your paycheck comes in, you pay them back.
On the other hand, a personal loan can also get extremely complicated. A complicated form of the personal loan is when you purchase a home under a lease option. This is in fact a loan which is agreed upon between you and the home owner. In the loan, you agree to pay a set amount of money every single month based on a set rate of interest, then at the completion of the loan terms, you can opt to purchase the property and pay the remaining balance, or you decline the option and loose all that you have paid towards the property along with the property itself.
Just like commercial lending institutions, personal loans too have to be within the capacity of the law and in such a case, the interest rate also needs to be within the legal limits based on your local laws. If you are residing in the United States, then no loan whether personal or commercial may have an interest rate no higher than that of 24.9% annually, or APR.
Furthermore, the contract itself needs to be within the capacity of the law to be considered legal and in the event that even one requirement of the contract is illegal, the entire thing is considered to be null and void unless in which case you fulfill all the obligations of the contract.
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